On July 29, 2014 the International Monetary Fund approved a new $5 billion dollar credit line for Morocco in an effort to support further reform by the government. The original PLL, or Precautionary and Liquidity Line, which was approved in 2012, expires in August.
This newly approved liquidity line will replace the older one that was initially instilled for $6.4 billion during economic crises following the Arab Spring movement. Morocco’s recent successes in reform policies helped gain the approval of the new $5 billion dollar PLL.
Morocco’s subsidy reforms and wage and investment tightening “helped cut the central government deficit to 5.4 percent of gross national product last year from 7.3 percent in 2012 and we expect a further fall to 4.3 percent of GDP by 2015.” Deputy managing director of the IMF, Noayuki Shinohara, commended Morocco’s economic fundamentals and the implementation of their policies stating that they “have contributed to a solid macroeconomic performance in recent years.”
Morocco will have access to the $4.5 billion in the first year and the full $5 billion in the second year of the agreement.
The value of this agreement is equivalent to 4.4 percent of Morocco’s gross domestic product and can be used to support further reforms that lead to inclusive economic growth. Although authorities expressed they do not intend to withdraw from the credit line, as it will provide a source of money if the country faces external economic forces such as rising fuel prices.
The PLL that was introduced in 2011 is designed to meet the liquidity needs of any member country that has displayed strong economic policy and implementation but may still face some economic vulnerability. The IMF explains, “the PLL arrangement will allow the authorities to pursue their home-grown reform agenda aimed at achieving rapid and more inclusive economic growth while providing them with useful insurance against external shocks.”
Although Morocco’s economy grew in 2013 by a total of 4.4 percent, it is predicted to grow by only 2.5 percent in 2015 due to a decrease in agricultural output.
Morocco’s rural areas are where the majority of the country’s poverty is concentrated. Morocco has four million citizens below the poverty line, three million of which live in rural areas. Seventy five percent of the rural poor depend on farming for their livelihood yet are limited access to “non-irrigated arable land, which has… poor agricultural potential.”
Hopefully Morocco’s economic growth will spread to these rural areas sooner than later. The PLL agreement with the IMF could be potentially helpful for this purpose.
– Christopher Kolezynski